Class differences in homeownership and mortgage debt burden across cohorts: the Israeli case

Abstract

This study investigates class inequality in homeownership and the mortgage debt burden of young adults (aged 25–35) in Israel, from the present cohort and from the 1980s. These two time points reflect the shift from a social-welfare system to a neoliberal regime. Data was drawn from the Household Expenditure Survey for the periods 1975 and 1980, as well as 2012–2013 (Israel CBS). The findings reveal that while gaps between the probability of mortgaged homeownership and outright ownership have remained remarkably stable for the low-income and middle-income classes, the high-income class has substantially improved its probability of mortgaged homeownership and decreased its probability of non-homeownership. Furthermore, the middle class has the highest mortgage debt burden. However, in late young adulthood (ages 30–40), the low class is saddled with a higher mortgage debt burden relative to income than the middle class, residing in locations with lower socio-economic status. Moreover, the high class has a higher mortgage debt burden than the middle class, when residing in areas with higher socio-economic status. This practice increases the latter’s wealth prospects and shows the financial burden imposed upon the low class in order for its members to have ‘a roof over their head’.

KEYWORDS:

• Homeownership
• housing debt
• young adults
• neoliberalism
• income class

Acknowledgements

I am grateful to Noah Lewin-Epstein, for his devoted guidance and insights. I would like to thank Moshe Semionov, Michael Shalev and Tally Katz-Gerro for their helpful comments. Yasmin Alkalay (rest in peace) for her endless devotion and dedication for my study and assistance in the data analysis.

Disclosure statement

No potential conflict of interest was reported by the author.

Funding

• The Yonathan Shapira Fund for Doctoral Research, Tel-Aviv University; • The David Horowitz Research Institute on Society and Economy, Tel-Aviv; • "Gefördert durch die Deutsche Forschungsgemeinschaft (DFG) im Rahmen der • Exzellenzstrategie des Bundes und der Länder - EXC-2035/1 - 390681379" • "Funded by the Deutsche Forschungsgemeinschaft (DFG - German Research Foundation) under the Excellence Strategy of the German federal and state governments - EXC-2035/1 - 390681379".

Notes

1 For an explanation of the omission of young Arab Israeli adults from this study, see p. 10.

2 The parents of the 1980s cohort are referred to as the “Palmach Generation”. “Palmach” refers to the precursor of the Israel Defense Forces (the “Traditionalist” generation). They are the cohort who fought for and established the State of Israel.

3 The data is from January 2019, before the Covid-19 crisis.

4 In 1975 and 1980, the surveyed population coverage was 82 percent and only included urban communities. In the 2012–2013 surveys, the surveyed population coverage had expanded to 97 percent, including renewed kibbutzim and collective moshavim, and more comprehensive coverage of the Arab Israeli population (which is not relevant here, because the Arab Israeli population is not included in the present analysis). It was decided not to narrow down the newer survey waves to the 1975 + 1980 population coverage, in order to capture a more comprehensive and accurate trends representative of the phenomenon at issue today.

5 While the traditional age range goes up to 34 years of age, one additional year was added in order to enlarge the sample size.

6 Jewish young adults comprised about 84 percent of the young adult population in Israel in 2012–2013 and about 95 percent in 1980.

7 Non-related house purchase loans were not measured in this variable.

8 Before the deduction of social security and health insurance contributions and income tax. This is made up of income from social security allowances and benefits, provident funds, dividends, interest, rents, pensions and alimony (it does not include income in-kind).

9 Each observation in the sample underwent calculation, after which the average change was computed.

10 Spearman’s r= 0.33, p = 0.000.

11 This variable was available only for the 2012–2013 survey. It is based on the Municipal Authorities Ranking conducted by the Socio-Economic Index, generated by the Israeli CBS. The index is based on a large number of variables that assess the socio-economic level of the population (CBS, 2012).